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Author:Humpage, Owen F. 

Working Paper
Even Keel and the Great Inflation

During the early part of the Great Inflation (1965-1975), the Federal Reserve undertook even-keel operations to assist the US Treasury’s coupon security sales. Accordingly, the central bank delayed any tightening of monetary policy and permanently injected reserves into the banking system. Using real-time Taylor-type and McCallum-like reaction functions, we show that the Fed routinely undertook these operations only when it was otherwise tightening monetary policy. Using a quantity-equation framework, we show that the Federal Reserve’s even-keel actions added approximately one percentage ...
Working Papers , Paper 20-33

Working Paper
Intervention and the foreign exchange risk premium: an empirical investigation of daily effects

Currency markets have witnessed a sharp increase in government intervention since 1985. Many observers believe that this intervention promoted the dollar's depreciation between 1985 and early 1987, and that intervention has since helped to stabilize dollar exchange rates. This paper tests for a systematic effect of daily dollar intervention on exchange rate risk premia. We test for both portfolio balance effects and signaling influences by using daily data on central bank intervention (in dollars) against both the yen and the West German mark. Following work by Dominguez (1989) and Loopesko ...
Working Papers (Old Series) , Paper 9009

Working Paper
New results on the impact of central-bank intervention on deviations from uncovered interest parity

Germany, Japan, and the United States continue to view foreign exchange intervention as an effective instrument, although the mechanism through which it operates is unclear. In this paper, we use official data on daily dollar intervention to examine its impact on exchange-rate risk premia through both the portfolio-balance and expectations channels. We define the risk premium in terms of deviation from uncovered interest parity and model its behavior using generalized autoregressive conditional heteroscedasticity. Our evidence of portfolio-balance and expectations effects is inconsistent ...
Working Papers (Old Series) , Paper 9207

Journal Article
Are successful interventions random events?

An examination of the Federal Reserve's intervention successes in the late 1980s, showing that, although the characteristic day-to-day fluctuations in exchange rates virtually ensured that a large share of these interventions would appear successful--purely by chance and even in the absence of a causal link--the number of successes proved larger than pure randomness would suggest.
Economic Commentary , Issue Mar

Journal Article
Exchange-market intervention: the channels of influence

A review of three channels through which central bank intervention could alter exchange rates, concluding that sterilized intervention is a very limited policy tool.
Economic Review , Issue Q III , Pages 2-13

Journal Article
Central bank independence

A discussion of how higher levels of central bank independence are associated with lower and more stable rates of inflation and why central bank autonomy is critical in a world where most governments are unwilling to hold themselves publicly accountable for price stability.
Economic Commentary , Issue Apr

Journal Article
A hitchhiker's guide to understanding exchange rates

A nontechnical guide to exchange rates that discusses the role of inflation and monetary policy in determining exchange rate movements, uses balance-of-payments concepts to illustrate the economic role of the real exchange rate, and examines the crucial role of expectations.
Economic Commentary , Issue Jan

Journal Article
Have international developments lowered the neutral rate?

One way to think about monetary policy is in terms of a neutral federal funds rate, one that exerts neither inflationary nor deflationary pressures. Recent declines in worldwide investment, coupled with the growing globalization of financial markets suggest that the neutral rate may be lower than the current stance of monetary policy and the stage of the business cycle may lead one to believe.
Economic Commentary , Issue Dec

Journal Article
Safe-harbor leasing: separating the wheat from the chaff

An examination of the safe-harbor provisions of the 1981 Economic Recovery Tax Act, with a discussion of the mechanics of the leasing, the revenue impact, and an analysis of criticism that led to the demise of the program.
Economic Commentary , Issue Oct

Journal Article
Recent U.S. intervention: is less more?

An analysis of the forecast value of U.S. interventions in the foreign exchange market over the past seven years, which finds that official transactions by U.S. monetary authorities generally did not seem to improve the efficiency with which the foreign exchange market obtained information during this period.
Economic Review , Issue Q III , Pages 2-10

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